Instance (e.g. lemmy.ml): like an email provider. You pick an instance but can talk to anyone since its the same infrastructure. I’m on the ‘lemmy.ml’ instance, you’re on ‘kbin.social’, and OP is from ‘reddthat.com’, but we’re all experiencing the same thing just like email.
Community (e.g. /c/linux): subreddit equivalent.
That’s pretty much it for the basics.
Think of it like email providers. You can go with Gmail, Outlook, Proton(mail), or even host your own server, but you can email anyone no matter which provider they’re on, because they all follow the same standard.